Empirical analysis of the lending decisions of Chinese formal financial institutions in rural areas

Abstract

This empirical research is aimed to analyze the development of microfinance principles in the lending decisions of the two Chinese formal rural institutions, namely the commercial banks and credit cooperatives. For this reason, it is tested if loan purposes are oriented towards social goals, and if the guarantee requirements for the farmers are too strict. The regression results show that this implementation is only partial. Farmers have to provide too strong guarantees that they cannot afford, and this does not allow the great majority of them to get access to the credit.